COBRA versus Temporary Health Insurance
What is COBRA?
Most people who are laid-off are familiar with COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act. COBRA is a federal law that gives a person who lost employer-sponsored healthcare the option and right to continue to pay for and receive that same coverage - but at their own expense. Basically, a person can receive group health insurance coverage when their benefits would otherwise be terminated - they just also have to pay the portion of the cost the employer used to cover. Often times, when an employer terminates someone, the human resources department will talk to an employee about when his or her insurance will expire and how to move forward in obtaining COBRA, but navigating through it isn’t easy and it's important to do your homework before deciding to either use or refuse it. It's necessary to find out what insurance you qualify for, as there are sometimes ways to reduce the cost of COBRA.
After losing health insurance coverage, a person has up to 60 days to decide if he or she will use COBRA and must pay the premium within 45 days of that. Depending on how risky you feel or what an Arizona health insurance broker suggests, you could risk going close to 60 days without medical insurance and take advantage of using COBRA if a big medical expense occurs (COBRA will retroactively cover bills during that time once you pay the premium).
One of the most important things that many people don’t realize is that COBRA isn’t only for employees who were terminated. Any person who was covered under the company’s health insurance plan, such as a spouse or child, is eligible to use COBRA as long as the loss of the insurance is from a qualifying event. Some events separate from job loss include divorce, aging out of a parent or family member’s plan, or if your hours have been cut from full-time to part-time.
The only problem with COBRA is that it comes with a big price tag. Paying 100 percent of the insurance premium that an employer used to foot most of the bill for is not cheap and many employees don’t realize just how much an employer is paying to provide health benefits for a company. Many who lose their job don’t take advantage of COBRA because cost of insurance rises right when your income drops or disappears.
What is temporary health insurance?
Temporary health insurance can be a smart and inexpensive temporary solution for those in between coverage options, those traveling out-of-network, and those wanting to fill gaps in their primary coverage. It is an affordable option for medical insurance that becomes effective as soon as you register and pay and typically is meant to provide coverage in the event of a catastrophe or large, unexpected medical expense. Temporary health insurance requires no pre-screening and can be kept for as little as 30 days or as many as 180 days. It can be paid monthly or in a single installment, and it is a coverage option for people who are between jobs or laid-off temporarily, students who have recently graduated from college and haven’t yet found a job with benefits, or new employees waiting for their benefits at a new job to kick in and only need insurance for an interim period.
Unfortunately, short term health plans lack a lot of the protection offered by the Affordable Care Act. The plans are non-renewable, and unfortunately, don’t have to cover pre-existing conditions. That means you can be denied coverage for a pre-existing condition and the provider can decline a claim, especially if it is for a pre-existing condition that wasn’t disclosed at the time of enrollment.
Temporary health insurance also doesn’t exempt people from the ObamaCare fee for not having insurance. It is not considered minimum essential coverage, and losing it won’t qualify you for special enrollment in ObamaCare’s Health Insurance Marketplace, but it is a good choice for those who are in between coverage options and want catastrophic health coverage.
Comparing COBRA and temporary health insurance plans
Although temporary health insurance can seem confusing, and it may seem easier to pay for COBRA since it doesn’t require a change in policies at all, it is still a costly decision and requires a comparison of what you need, what you can afford and what you’re actually eligible for.
Pros and Cons of temporary health insurance
- It is low cost.
- You can be approved quickly.
- Coverage can range from one month to an entire year.
- It’s a good bridge when you’re between coverage, specifically for catastrophic events.
- It doesn’t cover pre-existing conditions, including pregnancy or diabetes.
- You still must pay the fee for not having minimum essential coverage.
- It will prevent you from getting COBRA or HIPPA if you change your mind later.
Pros and Cons of COBRA
- It can be mixed with private insurance to tame the cost.
- With COBRA you can choose any health plan offered by your former employer.
- If you have a pre-existing medical condition you’ll still be covered.
- COBRA isn’t offered if an employer goes out of business, you’re fired for committing a crime, or the the company’s entire healthcare is discontinued for all employees.
- COBRA is not cheap - you’ll be paying a very high premium for coverage.
There are some obvious differences between the two, but it is important to make an educated decision because the type of plan you choose could have a serious impact on your financial future. The best way to figure out which temporary health insurance plans will best meet your needs is to have an Arizona health insurance broker pull some quotes for you. Not only will this save an enormous amount of time and money, but a good broker will know enough about the plans to make sure you buy the right one.